President Barack Obama is taking a cautious approach to the first financial regulatory challenge of his second term: naming a new head of the Securities and Exchange Commission.

On Monday, SEC Chairman Mary Schapiro announced she would step down from her job next month, a move long expected.

The White House said Obama will designate current Democratic SEC Commissioner Elisse Walter to be chairman after Schapiro departs on Dec. 14.

The move buys the administration time to find a replacement for Schapiro and avoid any messy confirmation fights in the coming months while allowing the agency to continue on its current policy path implementing the 2010 Dodd-Frank financial oversight law.

Walter served as SEC acting chairman in 2009, after joining the agency in 2008.

Like Schapiro, Walter spent time at the Commodity Futures Trading Commission, the Financial Industry Regulatory Authority and the National Association of Securities Dealers earlier in her career.

“I’d be surprised that they would be much different at all,” said F. Joseph Warin, the head of Gibson Dunn’s litigation group who worked with Schapiro and Walter when he served as outside counsel for NASD, which became FINRA. “They’re both consensus-builder types who try to understand other peoples’ perspective and don’t have a dictatorial or autocratic bone in their bodies. … I wouldn’t expect you would see much variation on that in terms of style or in terms of substance.”

Walter, however, cannot stay in the top job for too long.

Her term expired June 5 and she can serve on the commission until Congress adjourns at the end of 2013.

The Senate confirms members of the five-member commission, but the president chooses the chairman.

Treasury Department Undersecretary for Domestic Finance Mary Miller is seen by congressional aides and agency observers as a top contender to fill Schapiro’s spot on the commission.

The White House did not respond to a request for comment on whether the person nominated to fill Schapiro’s seat will then be appointed chairman or if Walter will remain in that role through the end of next year.

Miller, who came to Treasury from T. Rowe Price and has coordinated the writing of the Volcker Rule by multiple agencies, could be confirmed “without much drama,” a Senate Democratic aide said.

“There’s always likelihood of some holds here and there, but she’s generally been well-respected in this process and that’s not an easy thing to do after being in a high profile position with politically sensitive rulemakings, in particular with Volcker,” the aide said.

On Monday, a key lawmaker praised Miller.

“She came up and testified and I was very impressed with her — a very talented person,” Sen. Jack Reed (D-R.I.), who chairs the Senate banking subcommittee that oversees the SEC, said in an interview.

“You have to have somebody with the background and the experience with financial markets,” Reed said. He added that the next chairman must also be able to build consensus on the commission to get key rules passed and also be able to carry out congressional directives in a way that satisfies members of both parties.

A flashpoint for any SEC nominee is the Obama administration’s push to increase oversight of the money market mutual fund industry.

Earlier this year Schapiro had to abandon her effort to get reforms through the SEC because she could not muster the needed three votes to advance her proposal.

The Treasury-led Financial Stability Oversight Council is now considering what rules it can put in place given the SEC’s failure to act.

Schapiro’s proposed reforms have run into opposition from Republicans in Congress, and Democrats have expressed little support for making changes to how the funds are regulated.

No legislation needs to be passed for regulators to put in place new money fund regulations but a confirmation fight could give Republicans some leverage with the administration over the issue.

SCHAPIRO’S TENURE

Schapiro came to the SEC in 2009 as it was reeling from the financial crisis and facing criticism that it did a poor job of regulating Wall Street markets in the years leading up to the financial crisis.

Schapiro’s backers said she improved morale at the SEC, while implementing a raft of Dodd-Frank rules and overseeing the overhaul of an enforcement division that has since brought a record number of cases.

“Mary Schapiro took over the chairmanship of an agency that was failing in its job and she made major strides towards establishing it as an effective regulator,” Rep. Barney Frank (D-Mass.) said in a statement.

The agency has been criticized for not being more aggressive in pursuing cases against financial crisis bad actors, for problems caused by high speed trading, like the “flash crash,” and for its implementation of this year’s JOBS Act.

But Schapiro received mostly compliments Monday for her tenure.

“The SEC is stronger and our financial system is safer and better able to serve the American people — thanks in large part to Mary's hard work,” Obama said in a statement.

This article first appeared on POLITICO Pro at 10:59 a.m. on November 26, 2012.

CORRECTION: F. Joseph Warin was the outside counsel for the National Association of Securities Dealers, which became the Financial Industry Regulatory Authority. Not an employee of NASD.